Reply #64: The answer to your questions are elsewhere in this thread, but I'll

[AP]

try to make them clearer all in one spot.

Equalizing the burden of the tax code at all income levels means the tax rate has to reflect people's valuation of an additional dollar (or 100 dollars or 1,000 dollars) in income.

What influences how much value you have on a dollar of income? How many dollars you already have.

If you have 10,000 dollars, what would you do for another 1,000 dollars? Probably a lot. You would work hard and for a long time to get it, right? What would you do if you had 100,000 dollars to get another 1,000 dollars? Depending on your job, you might simply spend a weekend at work. What if you had a million dollars, how much trouble would you go to for another 1,000 dollars? You might call your broker and tell him to put 50,000 into treasury bills, or a non-risk muni bond, or something like that. You certainly would go get a second job and work nights for 3 months.

So, how is it fair to charge all three of those people the same exact rate for that extra 1,000 bucks in income? If you take away 330 dollars from each of those people, you're hurting the 10,000 earner way way more -- If it took that person three months of a second shift to get that extra income, you made that person work for a whole month just to pay the taxes on the income. For the 100,000 earner, it only too about 5 hours to work to pay the tax, and for the rich guy, he didn't have to do muc of anything to pay the tax.

Now, obviously, it's just easier to make more money if you have a lot of money. The millionaire might have to work overtime for three months to increase her earnings by 10% (which is what the poor person had to do), but probably not. And that presumes that a person with that much money is willing to sacrifice even more time for such little increases in wealth (compared to the poor person who might have to do that just to live with a modicum of dignity).

So, the tax code has to take into account those different valuations, or it would be burdening poor people more than rich. And when you allocate burdens unfairly, what you're really doing is relegating some people to poverty, and relegating others to wealth no matter how hard the first works and no matter how little the rich person works.

Our society is built on work and you don't want to turn it into one where the poor are not rewared fairly for their efforts, and you don't want to have rich people have a disincentive to doing productive labor (why work to get rich when you can live off the backs of the poor?). That's what happened in Europe up to the late 1800s, and it doesnt' work. The societies that reward labor will always beat out the ones that just reward wealth, and right now the EU and South America are ready to step up and form societies that reward labor, rather than wealth, and the US will be screwed if we have a flat tax code while everyone else is rewarding work.

Now, back to the fat exemptions. I don't have a huge problem with them, but if you want to be technical, you have to ask your self, "what's the big difference between 29,000 and 31,000 that results in the fat tax bill for the the 31,000 earner on her last 1,000 in income but not tax on the 29,000 earners next 1,000? What happens at that threshold that burdens the 30-31K earner?

And also why, do you want to screw the 31K earner so much more not just relative to the 0-30k earners, but also to the million dollar and more earners? Anywyere you put that exemption, it's going to be least fair to the people just above it, and most advanatageous to the people below it (and far above it), so you better have a good reason for making such sharp distinctions between the valuation of a dollar for people in such similar situations.

I like the EIC, which is an income sensitive credit. So, just so that all the math works, I think that what the US should do is have a 0 point -- if you say you don't have to pay tax until you make 30k, I think that that better be the threshold at which, if you make, less, you're getting a tax credit.

Personally, I suspect a sensible 0 point would by about 17.5. The more under that that you make, the bigger your EIC is. Above 17.5, the brackets could start as low as 2% on the first 10k, 4% on the next 25k, 7% on the next 40k, 9.5% on the next 85k, 11.75% on the next 100k, 18% on the next 400k, 25% on the next 1 million, 27.5% on the next 5 million, etc....

Or whatever. Dicsuss.